INTERVIEW with Angus Sedgwick: What’s happening with invoice finance down under?
The Australian business lending landscape is changing dramatically. Interest rates are at historic lows but there are signs that these might go up in the near future, companies are extending payment terms to small businesses, putting pressure on cash flow, and financing future growth is on the rise.
Angus is a veteran of the global financial services industry and has over 25 years’ experience operating in the insurance, financial advice and funds management industries in Australia and South Africa – including 10 years as the Managing Director of the largest broker in the Traded Endowment Policy market internationally.
tim provides businesses with flexible and innovative cash flow funding solutions which are tailored to suit business needs.
What is invoice finance and how does it help Australian businesses?
“Invoice Finance has many descriptions, however, it is a way for businesses to access funds which are locked in the payment system awaiting payment (invoices raised for goods delivered or services rendered) with their business client known as the debtor.
“Interestingly some 53% of Australian SME’s know little to anything about Invoice financing and how it can assist businesses improve cash flow, pay employees, suppliers, reinvest in operations and growth earlier than they could if they had to wait until their debtor paid them. The essential element is that it brings cash flow forward and at a highly flexible and cost competitive manner.
“Australian business is weighed down with delayed payments and thus can extend well beyond 50 plus days, which causes the business severe constraints and impedes business growth and thus opportunities. Imagine being able to confidently pursue new business opportunities and invest in your business with the knowledge that your cash flow is certain. Invoice finance provides this certainty and more. It is an unsecured funding line which can provide 80% to 90% of the invoice value within a few hours of lodgement and the balance known as the residual paid when you debtor pays, less a small discount fee..”
What is The Invoice Market (TIM) and how does it help businesses?
“The Invoice Market “TIM” is an innovative, and a highly flexible business cash flow provider. TIM provides a flexible cash flow funding facility, a revolving full facility (without lock-in contracts, concentration limits, and at highly competitive discount rates), and our Accelerator Supply Chain Finance solution, all of which are market leading. TIM is Next Generation Alternative Finance providers specialising in business cash flow funding/invoice discounting.
“TIM assists business by providing immediate cash flow funding and thus bringing forward profits locked in unpaid invoices. Businesses once understanding the process quickly realise that with the efficient use of invoice finance they can grow their business and use enhanced cash flow to negotiate real and sustainable discounts with their own suppliers, which then flows to improved profitability for the business. Cash is King!”
Can you give an example of how you’ve helped businesses so far?
“In late 2014 TIM was introduced to a client who had for several months attempted to secure working capital to grow their business. The business was a mid-size farm supplying produce to a range of buyers and they wanted to access the major supermarket chains. By implementing invoice discounting to their business, the farmer was able to negotiate terms with the supermarkets and rapidly increase production by securing further farm land (leased) and commenced on market buying from other smaller farmers to meet the demand of the supermarket chains. So successful he had become, the farmer secured a preferential ten year supply arrangement and entered into supply agreements with smaller farmers and ultimately becoming both a supplier and market agent. The business has grown to almost AUD $100M in produce sales and all started from a monthly funding line of AUD $500K per month. A true success story.”
What is happening in the invoice finance space in Australia – is it growing?
“The Australian debtor funding space is continuing to grow (slowly) as more SME’s are becoming aware of alternate sources of funding. In many respects the Australian SME market is conservative and SME’s see mainstream institutions as their first point of call. However, tighter business lending criteria, requirements for real property security and market education is giving rise to growth in the sector. But much more is required by the industry in order to educate SME’s and intermediaries providing advice to SME’s.
“There has been much consolidation between the incumbents which has created opportunity for smaller, agile and technology driven players to carve out a growing niche, provided that access to economical capital is available. This appears to be a challenge for small technology driven funders and P2P funders.”
What’s next for TIM?
“TIM recognises that in time there may be a requirement to partner or form a close strategic relationship with a larger well-funded participant within the debtor finance market, so as to take advantage of future opportunities and diversification of product and services.”